A worker arranges strips of veneer at a plywood manufacturing workshop (Photographer: Prashanth Vishwanathan/Bloomberg)

Decorate Your Portfolio With These Four Home Decor Stocks, Edelweiss Says

Brokerage Edelweiss initiated coverage on four home decor stocks with a ‘Buy’ rating.

The research company gave the most bullish target price so far for vitrified tiles maker Asian Granito India Ltd., plywood maker Century Plyboards India Ltd. and laminate flooring maker Greenlam Industries Ltd.

While another plywood maker Greenply Industries Ltd. received its second most bullish target price yet by a brokerage firm.

Among these four interior decorators, Asian Granito’ target price has the highest potential upside of 29.2 percent.

Here’s what Edelweiss had to say on these four companies:

Asian Granito India

  • Initiated ‘Buy’ with target price of Rs 720, implying a potential upside of 29.2 percent from yesterday’s close.
  • Well placed to leverage its vast distribution network and strong brand equity.
  • Prudently shifting focus to high-margin retail segment.
  • Rising utilisation and focus on premium products to propel bottom line.
  • Expect revenue, operating income and net profit to grow at a compounded rate of 14 percent, 21 percent and 40 percent respectively by March 2020.
  • Expect return on capital employed to expand to 20 percent by March 2020, compared to 12 percent clocked in the previous financial year.
  • AGL entails strong re-rating potential on improvement in retail mix.

Century Plyboards India

  • Initiated ‘Buy’ with target price of Rs 442, implying a potential upside of 17.4 percent from yesterday’s close.
  • Only integrated player with presence across wood panel industry.
  • Capacity in place to tackle burgeoning opportunities.
  • Lower raw material cost to spur margin.
  • Company in last stage of capex and is well-positioned to reap benefit of anticipated demand.
  • Expect revenue, operating income and net profit to grow at a compounded rate of 20 percent, 24 percent and 28 percent respectively by March 2020.
  • Strong compounding play in domestic wood panel industry.
  • Positive: Favourable GST rate, shift to organised players and government’s focus on housing.

Greenlam Industries

  • Initiated ‘Buy’ with target price of Rs 1,477, implying a potential upside of 20.6 percent from yesterday’s close.
  • Leader to rake in Goods and Services Tax benefits; Well leveraged to expand product basket.
  • Expect veneer business to turnaround by the next financial year.
  • Capex through, time to reap benefits.
  • Financial leverage to propel bottom-line growth.
  • Expect revenue, operating income and net profit to grow at a compounded rate of 12 percent, 21 percent and 35 percent respectively by March 2020.
  • Expect healthy growth in existing segments and turnaround in newer segments.
  • Strong re-rating potential.

Greenply Industries

  • Initiated ‘Buy’ with target price of Rs 395, implying a potential upside of 15.8 percent from yesterday’s close.
  • Expect pick up in real estate market, demand shift to organised players to propel growth.
  • MDF capacity augmentation: Potent revenue booster.
  • Plywood business perking up; high outsourcing to bolster revenue.
  • Tripling capacity to drive growth and to keep margins under pressure.
  • Expect revenue, operating income and net profit to grow at a compounded rate of 20 percent, 22 percent and 21 percent by March 2020.
  • Aggressive capex phase by March 2019, to keep return on capital employed under pressure.
  • Triggers: start of MDF capacity and pick up in plywood demand.
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